The United States is experiencing an industrial revolution where businesses outside of manufacturing are harnessing the power of the internet to scale up production and increase profits.
According to researchers at Princeton University and the University of Chicago in the National Bureau of Economic Research, the three sectors are contributing to the new wave: service, retail, and wholesale.
A co-lead author Esteban Rossi-Hansberg, Theodore A. Wells ’29 Professor of Economics at Princeton University’s Department of Economics and Woodrow Wilson School of Public and International Affairs said that they have found that these industries were now accounting for a larger share of national employment, and it’s because they were using fixed-cost technologies to standardize their offerings and increase their scale of operations.
Consider Starbucks and the Cheesecake Factory. Both companies have invested in specific technologies to help determine optimal staffing and food and drink production for each restaurant, each day. They also use these technologies to introduce new menu items quickly, ensuring product uniformity around the country.
The Horizontal Expansion was achieved across more locations in the country. It didn’t follow Henry Ford’s manufacturing revolution, that is, growing business in a concentrated location. The new industrial era is empowering the companies to spread, increasing the serving number of local markets.
Rossi-Hansberg said that this form of expansion has some precedents, like McD. Yet, it was not so usual for most services until more recently, with the information technology revolution.